J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Ltd

REASONS FOR JUDGMENT 1 Argument was heard on 6 February 2015 about the orders for costs arising from the hearing and decision in J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Pty Ltd (No 3) [2014] FCA 1380. In that decision, an application which had been made by Becton Property Group Pty Ltd ("Becton") for summary judgment was dismissed, and an application for leave to file a proposed further amended statement of claim by J & A Vaughan Super Pty Ltd ("Vaughan Super") was granted. Vaughan Super had also issued a notice to produce to Becton which was set aside on Becton's application. 2 Vaughan Super contended (a) that it was entitled to its costs in respect of the application by Becton for summary judgment which failed, (b) that it should be awarded costs both from Becton and the second respondent ("Mr Macdonald") on the application for leave to amend the statement of claim, and (c) that the costs in respect of the notice to produce should remain reserved. Becton's submissions, in contrast, were (a) that it was entitled to costs on its successful application to set aside the notice to produce, (b) that it was entitled to its costs in respect of the application by Vaughan Super for leave to file the proposed further amended statement of claim, and (c) that the costs of its failed application for summary judgment should be made costs in the cause. Mr Macdonald sought his costs against Vaughan Super in respect of the application for leave to amend but was not otherwise involved in the disputes about costs in relation to Becton's application for summary judgment or Vaughan Super's notice to produce which had been set aside. 3 It is convenient to deal first with the costs on the notice to produce because it can be dealt with quickly. Vaughan Super issued to Becton a notice to produce an insurance policy upon which Vaughan Super wanted to rely for an argument during the earlier hearing. Becton successfully applied to have the notice set aside on the grounds that the insurance policy was not relevant to the proceeding then before the Court. Becton's application had also sought an order for the costs associated with issuing the application to have the notice to produce set aside. 4 A notice to produce has the same coercive effect as a subpoena for production and must be complied with unless production is excused by the court or the notice to produce is set aside: Microsoft Corporation v CX Computer Pty Ltd (2002) 116 FCR 372, [36]; Cheung Kong Infrastructure Holdings Ltd v Bluescope Steel Ltd [2010] FCA 739, [24]. The notice to produce issued by Vaughan Super was set aside upon a proper, and successful, application by Becton, and in my view Becton is entitled to its costs in respect of the notice to produce being set aside. 5 The next matter to be considered is the costs on Vaughan Super's successful application for leave to file an amended statement of claim. Vaughan Super needed leave to file the proposed further amended statement of claim (Federal Court Rules 2011, r 16.53) and was successful in seeking leave. The party successfully seeking leave asks for an indulgence to which it is not entitled as a right and, therefore, is usually required to pay the costs of the application for leave and the costs thrown away by reason of the amendment: Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; Media Ocean Limited v Optus Mobile Pty Ltd (No 6) [2009] FCA 1319, [34]; Servcorp Ltd v Nuclei Ltd [2011] FCA 1229, [11]. An unsuccessful party opposing the grant of leave may, however, be deprived of its costs or may be ordered to pay the costs of the application for leave if that party has "unreasonably opposed" the application: Public Trustee v Nash (1921) 38 WN (NSW) 142; Media Ocean Limited v Optus Mobile Pty Ltd (No 6) [2009] FCA 1319, [34]. 6 Vaughan Super contended that neither Becton nor Mr Macdonald were entitled to their costs on the application for leave, in part because the costs in that application were intertwined with the costs incurred in Becton's application, and in part because it was submitted that Becton's and Mr Macdonald's opposition to the application was unreasonable. Counsel for Vaughan Super contended: […] In respect of the applicant's application to further amend its statement of claim, that application was filed on 1 October. Now, as a general proposition, such an indulgence by the applicant of the court would mean that the applicant would ordinarily need - would ordinarily be ordered to pay the costs. We say that, in the circumstances of this case, that should not occur for a number of reasons. First of all, the further amended statement of claim that was put forward was a perfectly conventional form and one to which your Honour was taken to a number of cases - a number of examples of and we say that the opposition to the filing of that further amended statement of claim was unreasonable. Your Honour may recall that Becton fought at every level and his only application was very intertwined with its opposition to the filing of the further amended statement of claim, so much so that, at times, it was difficult to work out whether we were hearing Becton's application or, in fact, the application - our application, so to speak. So we say that the applications were inextricably linked and to that extent, Becton's unreasonable opposition to agree to that further amended statement of claim being filed should result in Becton paying the cost. Now, initially, the second respondent you may recall, your Honour, had said it would not oppose the further amended statement of claim. That was subsequently retracted and it - the second respondent joined forces with the first respondent to oppose the filing and serving of the further amended statement of claim. To that extent, the second respondent is equally culpable, so to speak, in the need for us to have to appear in court on two days to hear - to argue what was a perfectly conventional further amended statement of claim. And to that extent, costs should be awarded - or the first and second respondent should, therefore, be liable to pay our costs. Vaughan Super did not point to any other conduct on the part of Becton or Mr Macdonald which was said to be so unreasonable as to disentitle them to the costs they would ordinarily have awarded in their favour in respect of the application for leave. 7 I do not consider the conduct of either Becton or Mr Macdonald in relation to Vaughan Super's application for leave to have been unreasonable. Unreasonableness is not established merely because an application for leave is unsuccessfully resisted. The administration of justice is advanced if an application for leave is properly tested by a controverter with an interest in the outcome. The unsuccessful arguments put on behalf of Becton and Mr Macdonald were open to be put, albeit unsuccessfully, and there is no other conduct which has been drawn to the attention of the Court that would justify disentitling either Becton or Mr Macdonald from the costs they would ordinarily have awarded in their favour in respect of the application by Vaughan Super for leave or for the costs thrown away by reason of the amendment. It is, therefore, unnecessary to consider the particular arguments raised for and against any difference in the position taken by Becton and Mr Macdonald in relation to Vaughan Super's application for leave which might result in either Becton or Mr Macdonald not being awarded costs. However, it may be desirable to note that the position of Mr Macdonald concerning the application for leave was reasonable. His opposition was said to have been unreasonable because he had altered the formal articulation of his position from not opposing the application for leave to supporting Becton's opposition to the grant of leave. However, the trigger for that formal alteration appeared to be the misunderstanding by those acting for Vaughan Super of the position which had been adopted by Mr Macdonald. Mr Macdonald had initially said that he would not oppose the application by Vaughan Super but had done so on the basis that Becton's argument concerning the pleading of liability against Becton, if successful, would necessarily undermine the pleaded case against Mr Macdonald: in other words that the case against Mr Macdonald depended upon an effective pleading against Becton. That position was conveyed to those acting for Vaughan Super, but a difference of view appeared to arise about whether Mr Macdonald's non-opposition necessarily was to be understood, somehow, that the otherwise defective pleading against Becton was nonetheless effective as the necessary precondition to the pleaded case against Mr Macdonald. Mr Macdonald's formal alteration of how his position was expressed did not make a substantive change in his position in respect of Vaughan Super's application for leave and he was not actively opposing Vaughan Super's application by the formal change, but made clear, by the formal alteration, that any success which Becton might have in its active opposition would necessarily affect the pleading against Mr Macdonald. The clarification of Mr Macdonald's position did not add any meaningful costs to any of the parties except, perhaps, those occasioned by the misunderstanding of Mr Macdonald's position by those acting for Vaughan Super. Oral submissions by counsel for Mr Macdonald were brief, relevant and helpful. The written submission for Mr Macdonald was also brief, clear and to the point. 8 The more difficult matter concerns the order for costs to be made on the unsuccessful application by Becton for summary judgment. The usual order where an application for summary judgment is dismissed is, for good reason, that the costs of the application be costs in the cause: Dal Pont, G E, The Law of Costs (2nd edition, 2009) 432 [14.25]; (3rd edition, 2013) 441-2 [14.25]. The rationale for making an order that costs be in the cause varies. In some cases it will be appropriate for the costs of an interlocutory proceeding to be made costs in the cause where it can be expected that the final award of costs will reflect how the costs of the interlocutory proceeding should be awarded. As was explained in Petar v Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142, [21]: The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court's focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts. It does not follow, therefore, that the usual order should be made in all cases. It may not be appropriate to make the costs of an interlocutory proceeding costs in the cause where there are live questions about whether those costs should be awarded to the party which is ultimately successful in the proceeding. 9 In Whitehall Holdings Pty Ltd v Custom Credit Corporation Ltd (Unreported, Supreme Court of Western Australia, Ipp, Pidgeon and Owen JJ, 19 June 1992), the Full Court of the Supreme Court of Western Australia applied the usual rule when dismissing an application for summary judgment. In that case, the ground upon which the appellants relied to seek a departure from the usual rule was that the respondent should have known that the application for summary judgment would inevitably fail. Ipp J said at 2-4: I shall deal firstly with the application for the costs of the summary judgment application. The usual order where an application for summary judgment is dismissed is that the costs of the application be in the cause so that the party successful at the trial recovers them. The basis on which it is said on behalf of the appellants that the usual order should not be made is that the respondent should have known before the application for summary judgment was brought or, alternatively, in the course of bringing the application, that it would inevitably fail. The principal defence of the appellants was a counter claim for damages that exceeded the respondent's claim, and it is said that the respondent should have known that the existence of this counter claim would have resulted in the application for summary judgment failing. Exceptionally, when an application for summary judgment is dismissed, costs are awarded to the defendant; cases of this kind occur where the applications should never have been made. It cannot be said that this case falls into that category. The application for summary judgment was first raised before the expedited list Judge who accepted that it was a reasonable procedure in the circumstances and allowed the case as a whole to stay in the expedited list pending the summary judgment application. It was accepted by the expedited list Judge at that stage that the application for summary judgment might resolve certain issues. This was not to be, but the attitude of the expedited list Judge at that stage does cast light on the appropriateness of the application for summary judgment. It is also highly relevant, in my view, that the learned Master indeed proceeded to grant summary judgment. Although this Court has held that the learned Master was wrong, it cannot be said that the application for summary judgment was not arguable. On the contrary, it is self evident that the application, having succeeded initially, was readily arguable. The rule that the costs of a summary judgment application may be ordered against an unsuccessful plaintiff where he knows of the existence of a defence rests in essence on the principle that applications for summary judgment should not be brought when the plaintiff is aware or should be aware that the application is hopeless and that it has no prospect of succeeding. As I have attempted to demonstrate, apart from the expedited list Judge considering that the application for summary judgment was appropriate, the Master himself thought that it should succeed. How it can now be said that the merits of that application were so hopeless that it should never have been brought eludes me. Pidgeon and Owen JJ delivered short separate judgments to the same effect. Owen J, however, added at 7: I would not wish to be seen to be suggesting that it would not be appropriate in some circumstances to make orders other than they be costs in the cause when a summary judgment application has been unsuccessful. It may be that as the lists in the civil jurisdiction of this court continue to blow out, this tendency to look to summary judgment may increase and that is a matter which I for one would view with some concern. Of course, this is not such a case. It was already in the expedited list. The feasibility of a summary judgment application being made was canvassed with the expedited list Judge and the application itself found favour with the learned Master. In that respect, for the reasons given by his Honour Ipp J, I cannot see that it could be said that the stance taken by the respondents to the appeal was so unreasonable that it ought now to reflect in an immediate order for costs. 10 The usual rule was applied in that case because the application for summary judgment which had been made was not within the exceptional category. I take a different view about the application for summary judgment which Becton made in respect of Vaughan Super. The circumstances in which the usual rule should not be applied are not limited to those in which an application for summary judgment should not be made: see Dal Pont, Law of Costs, (3rd Ed, 2013), 442-3 [14.25]; Petar v Macedonian Orthodox Community Church St. Petka Inc (No 2) [2007] NSWCA 142, [21]. They extend to those circumstances in which it may not be appropriate for the costs to be treated as a necessary step in the overall litigation which should be dealt with in accordance with the final order. In this case, the costs incurred in Becton's unsuccessful application for summary judgment were intertwined with the costs incurred in its unsuccessful opposition to the application by Vaughan Super for leave to re-plead, but the costs awarded in the former application may, perhaps, not be appropriate to be dealt with in accordance with the final order upon the ultimate disposition of the proceeding. Some of Becton's claims against Vaughan Super in its application for summary judgment could not sensibly be disentangled from those in its opposition to Vaughan Super's application for leave to file an amended pleading, and Becton is entitled to its costs on Vaughan Super's application where they overlap notwithstanding that the same arguments and the same material may have been used for an unsuccessful alternative basis of achieving the outcome it had sought. There are, however, some aspects of Becton's application for summary judgment which it was ultimately not necessary, or desirable, to resolve at an interlocutory stage, but which may have occasioned costs for Vaughan Super which are not also fairly referrable to its application for leave. I am not persuaded that the costs occasioned by those matters ought to be costs in the cause, because it may be that some should be borne by Becton even if finally successful in the proceeding. The issues raised by those matters, to the extent that they were not decided by the interlocutory decision, have not been decided and I am not persuaded that the party entitled to costs upon the final determination of the proceeding "when the matter is considered in overview" is likely also to be entitled to the costs on Becton's unsuccessful application to the extent that they were not also incurred in connection with Vaughan Super's application for leave. In Owen v Musladin (No 2) [2010] ACTCA 24 Refshauge J observed at [23]: There is no doubt that the costs of some interlocutory applications should await and depend on the outcome of the trial, such as, the costs of a dismissed application for summary judgment (Whitehall Holdings Pty Ltd v Custom Credit Corporation Ltd (unreported, Supreme Court of Western Australia, Ipp, Pidgeon and Owen JJ, 19 June 1992) (at 2-4 per Ipp J) or of an interlocutory injunction which raises a prima facie case (Petar v The Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 287 (at [21])). His Honour, however, went on to observe that "the costs of some interlocutory applications should be determined on the results of the application regardless of the outcome of the principal proceedings". In the present circumstances the appropriate order for the costs on Becton's application is to depart from the usual order and to order that those costs be reserved until further order. 11 Accordingly, the orders to be made will be (a) for Vaughan Super to pay the costs of Becton and Mr Macdonald on the application for leave to file a proposed further amended statement of claim together with the costs thrown away by reason of the amendment, (b) that Vaughan Super is to pay the costs of Becton in its application to have set aside the notice to produce, and (c) that any other costs of Becton's application for summary judgment be reserved until further order. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.